Become a Professional Forex Trader – The Key Considerations

Becoming a Professional Forex Trader

Trading the financial markets can be a thrilling and potentially lucrative endeavor, but one that’s fraught with incredible risk.

This risk is especially prevalent in markets such as forex, but the good news is that currencies can be traded speculatively and inherent volatility can be leveraged to achieve a profit.

However, between 65% and 84% of CFD trading accounts actively lose money, due to a combination of volatility, leverage and a fundamental lack of knowledge.

To succeed as a trader, it’s crucial that you approach the financial and forex markets with a carefully considered strategy, while several other facets are required to make the transition from recreational to professional trading. I’ll explore these further in the article below, while asking what practical steps you can take to become a professional trader!

Getting Started – The Key Trading Fundamentals 

Before you can take practical steps to become a professional trader or transition from being a part-time investor, it’s important to understand the fundamental factors that optimise your chances of success in the forex marketplace.

1. Understanding the Forex Market Basics

Understanding the Forex Market Basics

This is arguably the single most important consideration, as knowledge is your primary weapon and foundation for success as a forex trader. More specifically, you’ll need to comprehend the theory that underpins forex market trades and price movements, along with the structure of the marketplace and the factors that impact valuations in real time. In the case of forex trading, this means interest rates, inflation, trade inflows and the GDP performance of individual countries.

2. Developing a Keen Sense of Determinism

Once you begin to identify and understand the FX market in more detail, you’ll naturally develop a keen sense of determinism. This creates a mindset that comprehends the underlying laws that govern change in the forex marketplace, which can help you to avoid trading in an overly emotive or reactionary manner. This is especially important when looking to implement long-term strategies such as swing or position trading.

3. Setting Clearly Defined Goals

In addition to understanding the functionality of the FX market, you’ll also need to comprehend your own outlook and objectives as a trader. It’s from here that you can set clearly defined and manageable goals, which help to inform every aspect of your trading strategy and reflect the approach that you take to managing risk. It’s also important to test and adjust goals over time, in line with changing conditions and personal circumstances.

Setting Clearly Defined Goals

Taking the Next Steps – How to Become a Professional Trader 

With these fundamental considerations in mind, you should start to develop a broader understanding of the forex market while establishing a keen sense of determinism and manageable trading objectives.

However, this still only leaves you with a theoretical experience of forex trading, or a practical trading experience that has been significantly restricted in terms of timeframes and investment levels. So, here are some steps to help you trade more frequently and evolve your efforts into a sustainable career!

 1. Choose the Best Forex Trading Platform: Your first step should be to select a viable forex broker, which will provide you with the practical tools to navigate the market and connect you with an effective trading platform (such as MetaTrader 4). Make no mistake; this is arguably the best forex platform in the market and one that utilises customisable charts and a huge range of technical indicators. So, identify brokers that are partnered with this software and fully licensed by the Financial Conduct Authority (FCA).

2. Gain Practical Experience of the FX Market: Next, you’ll need to bridge the occasionally cavernous gap that exists between theoretical and practical trading experience. One of the best ways to achieve this is by leveraging a demo account through your chosen trading platform, as this exposes you to a completely simulated market environment that can be navigated using fake currency. So, you can backtest your strategies for up to six months, while gaining valuable insights into how the market works in real time.

3. Settling on a Trading Style: Using this combination of theory and practice, you should be able to settle on a viable trading style. There are various options available as a professional, depending on whether you want to leverage market volatility and achieve short-term gains or minimise by targeting longer-term strategies.

Here’s a more detailed breakdown of your options:

  • Scalping and Day Trading: Scalping and day trading are Highly favoured by professionals, these strategies require you to leverage short-term price movements through a high volume of orders that each yields incremental returns. While both prevent you from maintaining open positions overnight, scalping typically deals with shorter timeframes (sometimes minutes) and executes a higher volume of orders.
  • Swing Trading: I’ve already touched on swing trading, which is a strategy that lets you hold open positions for days or even weeks. This is a conservative strategy that looks to capture longer-term price swings, while it requires less intensive market research and preparation.
  • Position Trading: Positing trading is an extension of swing trading, as it focuses on maintaining open positions for months or even years in some cases. The key here is to minimise the risk posed by volatility and target long-term price trends, while it’s ideal for professionals who retain a relatively risk-averse outlook.

4. Minimise Leverage

Minimise Leverage

Leverage enjoys a close relationship with margin, with the latter described as a cash deposit that unlocks the latter and enables you to operate disproportionately high positions that can yield significant returns. However, such positions can also trigger disproportionate losses, while leverage can be as high as 200x your margin in some cases. So, look to minimise and manage leverage where possible, in line with your capital holdings, trading experience and appetite for risk.

5. Create Practical Risk Management Tools

While risk management is a broad term in the financial and forex marketplaces, there are practical measures you can take to safeguard your entry. In addition to managing leverage and position size, it’s also recommended that you establish precise entry and exit criteria for your trades, based on technical or fundamental analysis of the market. Then, look to manage these by implementing either stop loss or take profit orders, which look to automatically close positions once a predetermined level of loss (or profit) has been reached. This organically reduces and manages your risk, without compromising your strategy or access to specific assets!